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How To Improve Your Bank Customers Financial Health

For our physical health, we have doctors and personal trainers. For mental health, therapists can help. But do you have someone to assist you with your financial well-being?

As digital capabilities continue to improve, the need for convenience has largely been met. But what about financial advice? Most institutions offer solid transactional services, but providing guidance is not as high a priority. This has opened the door for alternative providers and start-ups that aren’t just reserved for wealthier customers.

Where banks stand on this issue can determine their future brand strategy. Do they genuinely care about each customer’s financial health and want to give them trusted advice? Or do they consider this service to be outside their scope?

With new fintech options and enticing promotions leading customers away from their financial service providers, building a stronger emotional connection with them is an important retention strategy. To do this, their emotional needs must be addressed.

Stressed & Worried Customers

Money is a huge source of stress for many people. In a 2018 fiserv study, only 37 percent of respondents said they are satisfied with their financial health. 30 percent said that managing finances is a burden – often because it is a reminder of their financial challenges. This finding was echoed in 2018 research by CFS Innovation – where only 28 percent of Americans were evaluated as financially healthy, with 47 percent spending more than or equal to their income in the last 12 months. 30 percent said they have more debt than they can manage and 36 percent are unable to pay all of their bills on time.

These statistics show a need for financial advice, and if banks and credit unions do not address it, customers will look elsewhere (or already have). The 2018 report The Secret Financial Lives of Americans revealed citizens’ struggles with money that they hide due to embarrassment:

“To their friends and neighbors their lives look normal, even prosperous. But privately, behind closed doors, Americans are badly in need of help with money and the emotions that surround it. [They] are financing the public half of their double lives by borrowing from the private half.”

44 percent of Americans reported that they would not be able to handle a $400 emergency without either selling something or borrowing – often from family and friends.

A Personal CFO

This research also revealed the need for a “Personal CFO” for every person, someone who would take a holistic approach towards providing them financial advice. Respondents also said they need help with maximizing their salary, career planning, end-of-life planning, budgeting, debt-management, and planning an affordable vacation. Only 21 percent of Americans reported to have a financial advisor – and amongst those that did, 64 percent still felt unsatisfied with “having someone to talk to about money.” Less than 15 percent of respondents said that their bank has asked about their progress toward saving/investing for retirement, explored whether their investments (held separately from the bank) are performing adequately, offered to help them create a budget, or tried to understand their dreams and what it will take to fund them.

And yet – one bank executive said in the study that these unmet needs are “just not what we do. We’re a bank. That’s not our job.”

This sentiment is only one opinion however, since many financial institutions are widening their service offerings and trying to become more customer-centric. Umpqua Bank, for instance, offers each customer their choice of a go-to financial expert.

The Opportunity

Financial institutions that improve their customers’ financial health are likely to receive higher satisfaction ratings. Digital tools can help (such as savings tools, educational videos, real-time access, and alerts), but advice from real humans will develop the strongest connections. Prioritizing advice-based relationships will also attract talented employees looking for meaningful work. While fees from late payments (often from the most vulnerable customers) will earn money for a bank or credit union, is it worth losing customers and creating a negative connotation with banking? This debate is important to consider when developing a business strategy for the future – which is likely to be a market in which providers compete with each other by becoming more customer-centric.

The traditional business model of banking – using fees and interest to make money and focusing primarily on transactional services – has been working for quite some time. Now, however, the landscape has shifted. Customers are demanding more as they experience better services in other industries and fintech addresses their unmet needs. Will banks current brand strategy be successful in future years? Or, are they vulnerable to a new player entering the market and owning the client relationship? Emotions are powerful drivers – and relieving stress, anxiety, and helplessness will have a large impact.

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